Payment Choices for Reverse Loans

The FHA Home Equity Conversion Mortgage is a reverse loan and along with its many features for seniors, are different ways they can access their funds in the line-of-credit.  They can choose to not take any kind of payment and simply take out some money at the close of escrow, or do a combination of the different options.

  • Cash at the close of escrow with a “tenure” payment.
  • Tenure payment only
  • Modified Term payment and if they want it, cash at the close of escrow.
  • Or no payments at all.   But payments can be set up later if the borrower wishes to have one at any time in the future, as long as there are remaining funds in their account.

Very few of my clients have ever opted for any kind of monthly payment, but let’s take a look at what a Modified Term Payment is.

The borrower chooses a certain amount of money to be sent to them each month, such as $2,000 for 10 years. Depending on the age of the youngest borrower and how much money is available in their account, they will receive it each month but not for their lifetime.

At some point in the future, it will stop being sent to them,  (10 years in this example) but if they still have money in their account, they can set up a new monthly payment, a tenure payment or stop it altogether or request a lump sum.  Again, it depends on how much reserve they have in the line-of-credit.

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Every person has their own unique concern or goal and depending on a number of factors, such as paying off a large mortgage, there may not be enough money left in the account to choose a payment option, but at the least, they will have eliminated their mortgage payment and that would become extra income to them each month.

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